THE WAPO piece on slow wage growth despite low unemployment reveals another
example of policy-makers (and economists) having an idee fixe which,
literally, steals income from the working class whenever unemployment gets
"too low" The great Michal Kalecki wrote about this in 1943 with his The
Political Aspects of Full Employment. The idea of a "natural rate of
unemployment" or a NAIRU (non-accelerating inflation rate of unemployment)
is to give intellectual justification for policies basically designed to
keep wages from rising. As Anwar Shaikh has argued, capitalism as we
know it, cannot function well when wage growth exceeds productivity growth
--- that cut into profitability is a "bridge too far" for capitalists.
Meanwhile, the FACT is that there is no such thing as a NAIRU (or "natural"
rate). That didn't stop a group of economists from putting out a lengthy
symposium in one of the main Economics journals (Journal of Economic
Perspectives) all about the "natural rate". (Even though it had been
published in the same journal, at least one of the writers had never even
read James Galbraith's piece "Time to Ditch the NAIRU" which showed with
meticulous use of data that there was not such animal.) Of course the
reason the so-called "natural rate" is so popular with most mainstream
economists is that it's a neat way to justify policies of "wage control"
without getting your hands dirty with explicit class bias.
Glad the WAPO published that piece --- bet most economists will ignore its
implications ...